This article is written by Apurva Singh, an alumnus of Dr. Ram Manohar Lohiya National Law University, Lucknow and edited by Akanksha Yadav, who is pursuing 3rd year of B.A. LL.B (Hons.) from Dr. Ram Manohar Lohiya National Law University, Lucknow. In this article, Apurva has thrown a light on the laws related to betting and gambling in India along with important case laws.

Introduction

In sports, betting is the act or practice of putting money on the outcome of the sports events based on a prediction or guess. Nowadays, for many people betting has turned into a great interest and a way of business too. worth millions. Whereas it is present secretly in some countries, there are other countries in the world where betting is practised openly. The term “Betting” is generally regarded as being synonymous with wagering, but it is usually used to describe wagers in connection with events such as races or matches between individuals or teams.[1]

Gambling in India has existed from time immemorial. If we were to believe the ancient epics, the Mahabharata contains instances where people gambled away their entire kingdoms and families. Further, mythological tales of Damayanti highlights that gambling was very much a part of Indian society. There have been similar mentions in the Arthashastra.[2]

However, gambling in modern India has been seen as mostly socio-economic evil, and this is done with no wrong purposes. Gambling has led to many a household on the verge of bankruptcy and socially, it has been terrible wherein a drunk member of the family would gamble away all the finances of the family and in-turn commit grave crimes like spouse beating or beating the children. Incidents like these were used as a rationale by Mr Nitish Kumar when he introduced a blanket ban on alcohol in Bihar and made draconian laws to that effect.

The Supreme Court, in Reeja v. State of Kerala, [3] recognized the anti-social effects of gambling, and mentioned about how the sage Manu outrightly condemned gambling; Yajnavalkya sought to bring gambling under State control; Kautilya doing the same etc. In modern India, the lotteries were introduced in Goa under the Portuguese rule, and this was followed by the popularization of the lottery culture. Post-independence, Kerala became the first state to come out with a lottery scheme. Based on the twin touchstone of augmenting financial resources and curbing illegal gambling, lotteries became popular in India.

Laws Pertaining to gambling in India

Prior to the enactment of the Indian Constitution, betting and gambling in India were regulated by the centralized Public Gambling Act, 1867. This was changed with the constitutional schemes. Betting and Gambling in India falls under the List II of the Seventh Schedule of the Constitution, i.e. the entry 34 in the state list. Similarly, under entry 62 of the State list, the government is equipped to make laws on tax collection on betting and gambling. The Adoption of Laws Order, 1950 narrowed the jurisdiction of the Public Gambling Act to “Uttar Pradesh, Madhya Pradesh, Delhi and Punjab.” The other states went on to legislate their own laws with respect to betting and gambling, viz. the West Bengal Gambling and Prize Competition Act, 1957; the Kerala Gambling Act, 1960; the Jammu and Kashmir Gambling Act, 1977 etc. Section 2(b) of the Public Gambling Act, states that “gaming includes wagering or betting but does not include lottery.”[4]

If a broad evaluation of the Gambling Acts promulgated in India is undertaken, it will be evident that the main purpose of these Acts in snot to prevent gambling entirely but to suppress and regulate gaming in public houses. Such gaming is prohibited in public houses when it is carried out for profit or for the gain of the owners or the occupiers of the premises.[5] Furthermore, on a broad evaluation of the various prevailing aspects of sports betting, it can be said that gambling and betting contracts may fall within the ambit of section 30 of the Indian Contract Act, 1872, which deals with wagering contracts.

However, if we consider a comprehensive analysis of things, betting industries can generate a huge amount of revenues in India. The profit amounts approximately to US dollars 60bn ~ 3.5% of India’s GDP.[6] Even then, the archaic laws in India, since the colonial era, have been against such games. It is interesting to know that the British Government now allows all forms of gaming.  In India, except for the States of Goa by Section 13A of The Goa, Daman and Diu Public Gambling Act, 1976 and Sikkim by The Sikkim Regulation of Gambling (Amendment) Act, 2005, all other states have banned such games. One thing which is very crucial to note is that all such laws have generally excluded games of skill from the category of banned games. However, the underlying difference between the game of skill and game of chance has been subject to judges’ discretion and contentious; and the same is illustrated under the next heading.

Skills-Based Game v. Chance Based Game

Let us analyse this difference with the help of a few judicial pronouncements, to make the distinction more clear.

In Rex v. Fortier[7], the King Bench for the first time differentiated between the game of chance and game of skill. It defined the game of chance as a game which either wholly or partially is dependent on mere luck without the involvement of skill or adroitness in the outcome of the game. Whereas while differentiating with the game of skill it was of the opinion that in the game of skill, the outcome is not left to chance but is dependent on the intelligence factors like superior knowledge and attention or superior strength, ability and practice.  

A sport or an athletic game falls within the purview of the game of skill since an athlete with superior strength, skill, ability, practice and form will in all probability win over an athlete or a team with lower skills. In these cases, the element of chance, is predominantly inferior to the element of skill, so much so, that these games can never fall under the domain of game of chance. Gambling, on the other hand, consists of an element of chance, consideration and a reward. In a nutshell, gambling is a payment of a prize for a chance to win a greater prize.

The Supreme Court in State of Andhra Pradesh v. K Satyanarayana has even gone to the extent to hold that game of cards like rummy, is a game which is based upon skill and cannot be considered as a game of chance.[8] The apex court’s holding in this case and Chamarbaugwala case,[9]  has focused upon the element of skill and mentioned that:

(i) There are competitions in which success depends on a substantial degree of skill, such competitions are not ‘gambling’

(ii) In a game, if the chance is also a deciding factor in the outcome of a game but at the same time game is mainly dependent on the skill of the player, then the game will be considered as a game of skill.

In Jaywant Balkrishna Sail v. State of Maharashtra, a writ petition was filed invoking the sections of the Bombay Prevention of Gambling Act, 1887 in 2012 against 17 senior citizens. They were caught and arrested for playing Rummy and Bridge while a surprise raid conducted by the Mumbai Police. The division bench of the Honourable Bombay High Court held that Bridge and Rummy do not come under the ambit of gambling as both the games are dependent on skill more instead of chance. Though Poker is not exactly a “game of skill”, it has been considered as “game of skill” in the light of aforesaid Judgments.[10]

Prize Competition Act  

Competitions, where the winners and/or the other persons are rewarded either in cash or kind for solving a particular game/rebuses/crosswords etc. using his skills with a quantum of elemental luck, is known as “prize competition.” Prize competitions nowadays vary from smartphone applications to online games. The category might also be said to be inclusive of a few types of game shows which allow in live participants through SMS or calls. However, traditionally these kinds of competitions were better associated with advertisements to the same in newspapers, magazines or radio channels.

Section 2(d) of the Prize Competition Act defines prize competition as to any competition where prizes are given for solving any puzzle which is either based upon the building up or arrangement, or permutation or combination whether of letters, words, or figures etc. Examples of such prize competition include a crossword prize competition, a missing- word prize competition, a picture prize competition etc.

The main legislation governing such competitions is The Prize Competition Act, 1955; which makes it illegal to offer net prizes exceeding the monetary valuation of Rs. 1000/month (as per Section 4 of the said Act). Similar is the provision which makes it legislatively invalid to allow more than two thousand participants (again Section 4 of the same Act). The requirement of the licence is also mandated (as per Section 5 of the same Act). Doing otherwise attracts a three-month prison term and/or a maximum penalty of Rs 1000.

In Case of  RMD Chamarbaugwalla v. Union of India, the petitioners, who organised various prize competition in different places in India, contested the constitutionality of the above-mentioned section 4 & 5 of the Prize Competition Act, 1955, alongside the requirement of a licence to conduct such businesses. The Government who were the respondents contended that if the definition is properly construed, it means and includes only those competitions which were of gambling nature. Even if it were not so, the contentious provisions were valid after the application of the doctrine of severability.

The Supreme Court held that the competitions in which skill is the main deciding factor of the outcome of the competition, such competitions would not come under the ambit of the Prize Competition Act.

In Kaun Banega Crorepati Case[11], following Calcutta High Court’s observance that game shows on TV are not covered within the definition of a prize competition, the Bombay High Court held that the Prize Competition Act had a narrow and limited meaning and is not inclusive of skill games and competitions such as Kaun Banega Crorepati. The reasoning given by the court was that the Prize Competition Act only covers competitions in which prizes are given for solving any numerical or alphabetical puzzle and Kaun Banega Crorepati is not such a game.

The Curious Case of Tamil Nadu

Under the Tamil Nadu Prize Schemes (Prohibition) Act, 1979, there is a prohibition to conduct or promote prize schemes. If the format of the game provides for the purchase of goods and the draw of lots for selecting the prize winner from amongst the best persons who have purchased the product, then it is liable to be covered under the said act. Contravening these provisions is made a criminal offence where offenders may be punished with up to three years of imprisonment. Following such provisions only, Pepsi’s one crore Jackpot prize in association with KBC was not made applicable in Tamil Nadu.

No other state in India has made a specific law banning prize schemes on products, similar to the Prize Schemes Act of Tamil Nadu. Companies have assumed that there would be no other laws prohibiting such schemes, forgetting the provisions in the Consumer Protection Act and the applicability of lottery laws to these competitions.[12]

Online gambling in India

There is no reference made to online gambling in The Public Gaming Act of 1867 as the internet was not even invented when the Act was brought into existence. Therefore, it is very unclear whether online gambling is legal in India or not, though it is argued to be illegal with subject to the wordings of the Act.

CLICK ABOVE

The Information Technology Act of 2000 is the first piece of legislation that can be considered when talking about laws relating to online gambling or betting in India. The Act has enacted various provisions and criminalised certain online activity by making them an offence under the act. The problem is somewhere the same as there is no exact usage of term online gambling in the Act. But, the Act has authorized the Indian government to block foreign sites if offering gambling or betting.

In India, after amending the Sikkim Online Gaming (Regulation) Act, 2008,  Sikkim became the only State which permits online betting. The only condition that needs to be fulfilled is that the website through which one bet, its servers should be based in Sikkim.

Initially, Sikkim planned to roll out ‘gaming services’ across India using the Internet. But this was not permitted as it breached the duty of Internet Service Provider rules under the Information Technology Act, 2000 which bars Internet Service Providers from hosting gambling- related content. The Central Government later clarified that Sikkim could offer only gambling or gaming opportunities inside its territorial boundaries.[13] The new amendments reflect the condition that licensed gaming can be offered only through “intranet gaming terminals” across the state.[14]

Recently in 2016, Nagaland Prohibition of Gaming and Promotion and Regulation of Online

Games of Skill Act, 2016 (Gaming Act) was passed which regulates and promotes “game of skill”. The Act allows the issuance of a license to a person, firm, company or limited liability company (LLC) incorporated in India which is substantially held and controlled in India for conducting “games of skill” (on websites, mobile platforms, television or any other online media) too. After a license is given, the Act protects the wagering or betting on the “game of skills” which would have otherwise amounted to an illegal and punishable act.  

International Perspective

In some countries, especially those where the state is strongly influenced by the religious beliefs of people like some states in the Middle East and Southeast Asia, such states are of the opinion that the role of the Government is to protect the public from what it sees as sinful behaviour. Such states often impose a complete ban on gambling (and often, for example, severely restrict the consumption of alcohol also).

At the same time, there are some states like the US State of Nevada, the Island of Macau and some small island state which consider betting or gambling as an export

Industry. These states have licensed online gambling with the view that if online gambling is used properly it can help in designing the trade and will effectively help in generating revenue by increasing tourism and employment.

Then there come countries which have licensed gambling. Examples of such countries include the UK, many European states, Australia, and a number of States in the USA. These countries operate midway between the above-mentioned two extreme views. Though the government has allowed gambling, there are laws to regulate and control gambling.

Recommendation of Law Commission Report 2018

In 2018, the Law Commission of India headed by Justice B. S. Chauhan submitted its 276th report on legalizing betting in India. The issue was taken into consideration on the direction of the Supreme Court. The Law Commission advised to regulate the betting and gambling in India, which is a subject that comes under the state list. It did not recommend to impose a blanket ban as it was of the view that banning betting and gambling is desirable but it is not possible to avoid these activities altogether.

The following suggestions were provided by the Law Commission Report:

1. Regulating Gambling and Betting: The State may enact legislation for regulating betting and gambling. The Parliament can also bring a model law under Article 249 or Article 252 which State could adapt to regulate the betting and gambling.  
2. Regulations governing Gambling and Betting: There should be the issuance of licenses for legalizing such activities.
3. Classification of Gambling: There should be a division of gambling into  “proper gambling” and “small gambling” based on the income of individuals. People with a low pay scale will only be permitted to indulge in the “small gambling”.
4. Prohibited Persons: Three categories of people should not be allowed to indulge in the activities of gambling and betting. These categories are minors, people who receive subsidies from the Government and people who are exempted from paying tax under the Income Tax Act and Good and Services Tax.
5. Amendments to FEMA: The Foreign Exchange Management Act and the Foreign Direct Investment Policy should be amended to encourage Foreign Direct Investment in Casino or Online Gaming Industries. This would help in increasing the revenue along with promoting hospitality and tourism.
6. Amendments to IT Rules: The intermediaries should be allowed to host and transmit content related to gambling in States where gambling is licensed.
7. Match-fixing and Sports fraud: Match-fixing and Sports fraud should be made criminal offences liable to be punished severely.

Conclusion

There are both kinds of opinion when it comes to the question of whether betting and gambling should be banned in India or not. Some justify the ban which is currently imposed on the betting and gambling by stating it as an evil which breaks house if one gets addicted to it. At the same time. Whereas, at the same time, some try to defend the betting and gambling, for reasons like that it will help in increasing the revenue, bring more element of sport, increase the spirit of competitiveness in the games.

Mr. K.T.S. Tulsi, who is Senior Advocate at Supreme Court and also an expert in the fields of sports law. At FICCI-CLA conference held in October 2013, he presented a paper titled “Existing Sports Law in India: Legality of Betting, Criminalization of Sports and Adequacy of Anti-Doping Laws”. He stated:

“Practice of betting is purely contractual in nature and betting should not be illegal only because it’s immoral even though it is not violative of any person’s right. Moreover, legalizing betting would enable the government to put more checks and balances and it ensures transparency, which would indeed be a blessing in disguise. The revenue generated from legalizing betting could be used for the betterment of sports, impart world-class training to our sportsmen and develop better infrastructure in our country which by and large is quite primitive…”

But, before deciding on the issue of gambling legalization, India should heed the cautionary words of Arjuna just before the fateful dice game depicted in the Mahābhārata: “Take care. A river in flood will overturn every tree that grows beside it.”

References

[1] Sethi’s Law relating to Gambling, Betting, Lotteries and Clubs, 3rd Edn, Law Publishers(India) Pvt Ltd. at Page 47.

[2] Mukul Mudgal, Law & Sports in India, Ed. 1st. LexisNexis Butterworths Wadhwa Nagpur, at page 13.

[3] Reeja v. State of Kerala, 2004 (3) KLT 599.

[4] § 2(b), Public Gambling Act, 1867.

[5] Mukul Mudgal, Law & Sports in India, Ed. 1st. LexisNexis Butterworths Wadhwa Nagpur, at page 169.

[6] Jay Sayta, Legality of Poker and other game of skill: A critical analysis of India’s gaming laws, NUJS Law Review, January-March 2012. Page 94.

[7] Rex v. Fortier, 13 Que K.B. 308; as cited in Mukul Mudgal, Law & Sports in India, Ed. 1st. LexisNexis Butterworths Wadhwa Nagpur, at page 173.

[8] State of Andhra Pradesh v. K Satyanarayana, AIR 1968 SC 825.

[9]  R. M. D. Chamarbaugwalla v. Union of India, AIR 1957 SC 628.

[10] Hariani and Co., Gambling and Betting Laws in India, By Law – The legal spreadsheet, available at <http://hariani.co.in/newsletters/August_7_2013.pdf>.

[11] News Television India Ltd. and Others v. Ashok D. Waghmare and Ors., 2006 (2) MhLj431.

[12] Jay Satya, Gambling Laws in India, “Legality of Pepsi’s one crore jackpot prize and why this competition is not available in Tamil Nadu”, <<http://glaws.in/2011/10/illegality-of-pepsis-one-crore-jackpot-prize-and-why-this-competition-is-not-available-in-tamil-nadu/>>.

[13]<http://economictimes.indiatimes.com/news/politics-and-nation/legalising-gambling-a-huge-bet-for-sikkim-lottery-operators-considering-gaming-shop-model/articleshow/50631922.cms>.

[14] The Sikkim Online Gaming (Regulation) Amendment Act, 2015.

[15] https://www.gamblingsites.com/online-gambling-jurisdictions/india/.